As has already been reported on several sites, the videos from June's inaugural Virtual Goods Summit at Stanford are now online. Thanks to the organizers for making the videos freely available - I wish more conferences did this.

I took a heap of notes at the Summit, so why not share them now as well, both in "Top 10" and raw format.

My Top 10 Notes from the Virtual Goods Summit:

1. James Hong of HotorNot.com
On HotorNot, users can purchase a $10 rose to send to other users. The rose dies 2 weeks later. HotorNot figured there were three value propositions inherent to a real life rose: the flower itself, the gesture of giving it, and the trophy effect of having received it. HotorNot figured that for virtual roses, 2 out of 3 of those values weren't bad - and they were right. The $10 rose is HotorNot's highest priced item, but it is still their best seller. James Hong said re: price elasticity, "It's not impossible that if we raised the price of the rose, we'd sell even more."

2. Paul Thind of Habbo Hotel
Habbo puts spending caps on every payment method to control economy & keep parents happy - so users can spend money only on 2-3 set days of the week.

3. Craig Sherman of Gaia Online
Gaia has three full time people on staff whose job it is to open envelopes filled with dollar bills and coins because people are desperate to get money into their accounts but can't find a suitable payment method.

4. Min Kim of Nexon
Average user lifetime in a Nexon game is 2-4 years; Audition, Nexon's newest game, is 50% female; Maple Story and Kart Rider are 20-30% female.

5. Tim Stevens of DoppelgangerThe typical console game would not benefit from virtual item sales because of its lack of a continuing connection with its audience. I.e. the game launches, everyone buys and plays it, then most if not all of them leave very quickly for the next game. The community doesn't grow and care about their presence in the game long-term.

6. Daniel James of Three Rings
The average Puzzle Pirates user spends 2.5 hours per day in the game. Some drop in and leave, but others spend up to 9 hours a day in-game.

7. Raph Koster of Areae
Regarding preventing and tracing fraud: "You need to serialize everything - so you can trace the path of a virtual coin right back through to its minting."

8. Kyra Reppen of Neopets
Neopets builds their item packages and costs around a template metric of $10-15 per complete outfit.

9. Kevin Efrusy of Accel Partners - Facebook's VC
The Facebook gifting service was just an experiment. A third party will use the newly-launched Facebook Application Platform to deliver a far more successful gifting solution. He said if he were an independent developer, he'd be working on that right now as he believes it is a huge opportunity.

10. Eric Bethke of GoPets
GoPets users are 80% female, one third of whom are in North America. Users are spread throughout the 20s, 30s, 40s, 50s age groups. Interestingly, GoPets highest ARPU is from the low 30s age group.

All of my raw, totally unedited notes from the Virtual Goods Summit, after the jump.

The following 10 revenue models allow some or all of their associated game or virtual world to be played for free. The ordering is quite unscientific and I'm sure I've missed something obvious or messed up a detail. I leave it to the internet to correct me.

1. Virtual Item Sales
A well familiar revenue model first established in Korea and now the dominant model in Asia. Nexon - makers of KartRider, MapleStory, Audition and more - are widely seen as the leaders in this area, doing $230M of gross revenue in 2005 (the most recent year for which they've released figures), with 85% of that revenue coming from virtual item sales.

Virtual item sales is the practice of allowing users to purchase functional, decorative, or functional & decorative in-game items for use in and out of gameplay. A virtual item system usually uses two currencies - an attention currency (users earn virtual money via in-game activities) and a real money-based currency (users buy virtual money using real money). Typically, 5-15% of users opt for the latter currency and the influx of real world money is what provides the virtual item sales revenue stream.

What's so compelling about virtual item sales is the unlimited ARPU (average revenue per user). According to Daniel James, CEO of Three Rings, some hardcore Puzzle Pirates users have poured more than $10,000 apiece into the game via virtual item purchases. To reach that contribution level via a World of Warcraft-style $15/month subscription would take a user 55 years.

While extremely shaky sources peg the overall size of the virtual item sales market at $1.5-2B this year, without an NPD-esque measurement organization there's no way to verify that number.

2. Subscription TiersRunescape, the Java MMO from Jagex, is one of the leaders in the tiered subscription space. A tiered subscription model allows users to play the core game for free, but those that desire access to elite weapons or other game content, must pay a small ($5/month) subscription fee. Over 1 million of Runescape's 6+ million users have opted into the tiered subscription program, grossing $60M annually for Jagex.

Dungeon Runners, an NCsoft free to play MMO, offers a similar $5/month subscription package that affords players access to the elite items, a bank and the ability to stack potions. It also gives subscribers server queue priority.

3. Advertising
Several different forms of game-related advertising revenue streams have popped up in recent years. Firms such as Massive, IGA and Double Fusion do big business in in-game advertising for clients such as EA, Activision, THQ and Microsoft. Game ad agencies typically serve up static ads (ads that ship with a product and never change) or dynamic (ads that are updated in real time via the net) within game products that are contextually appropriate for advertising (i.e. sports, racing, or contemporary shooters).

The size of this conventional in-game advertising market is currently pegged at $100-200M, according to well-placed industry sources. However, the number and quality of games with dynamic advertising enabled is escalating dramatically. So much so that Yankee Group predicts the in-game ad market will reach $732M by 2010.

But other, more emergent forms of in-game advertising have been at the forefront of enabling free to play. Examples include:

4. Real Estate or "Land Use Fees" Second Life is the biggest legitimate player utilizing this revenue model whereby virtual land is sold leased to individuals. Monthly lease fees range from $5 to $195, depending on the size of land in question. Users may also purchase their own island for a one time fee of $1,675 in addition to a monthly fee of $295.

Entropia Universe uses land auctions as a revenue stream, but a recent headline-making $100,000 land sale has been called into question as the successful bidder is an employee of Entropia's developer, MindArk.

5. Merchandise
In what's become a phenomenon of Furby proportions, Webkinzplush toys and their associated Webkinz World have taken the pre-teen set by storm. Users purchase a $15 Webkinz plush toy at retail and enter a secret code to activate the associated virtual character in Webkinz World. Beyond the retail plush toy purchase, there are no additional fees for playing in Webkinz World.

Two million Webkinz toys have been sold since April 2005, with more than 1 million of those users registering their pet online. That's more than US$20M in retail sales in just 24 months. Products such as Bratz/Be-Bratz are quickly jumping on this bandwagon.

Another successful merchandise-based revenue model is collectible card games, or CCGs. Neopets launched a CCG in 2003 and just this week MapleStory became the latest free to play game to go this route, announcing a partnership with Wizards of the Coast. Consumers purchase real-world MapleStory collectible cards that come with codes redeemable for exclusive in-game content in the MapleStory MMORPG.

6. Auctions & Player Trades
In June 2005, Sony set up Station Exchange on select Everquest II servers. Station Exchange facilitates player to player trade of in-game items - including the provision of an escrow service - in return for a 10% closing fee as well as listing fees ranging from $1 (items and coins) to $10 (characters).

Entropia Universe - a world in which virtual items actually decay with use and require real money to repair or replace - utilizes first party auctions as their primary revenue stream. This means that instead of merely facilitating player to player auctions and taking a cut (a la Station Exchange's eBay model), Entropia auctions items directly to their players.

Entropia items sell for ludicrous sums, with rare weapons auctions closing at $26,000, land auctions for (allegedly) $100,000. The May 2007 auction of five in-game banking licenses brought in $404,000, total. Ironically, Entropia takes no fees for player-to-player auctions.

In the wake of this success, watch for third party virtual item auction houses such as Dan Kelly's Sparter.com to offer developers and publishers a cut to ensure the (exclusive?) cooperation of their products.
7. Expansion Packs
The best known example of expansion packs as a primary revenue model is the Arenanet product, Guild Wars. Likened by Richard Garriott to a series of fantasy novels, Guild Wars relies not on monthly subscription fees for its revenue, but on the sale of successive expansion packs for $29.99.

The game's creators argue that the thin-pipe origins of their technology allow their game to be run far more economically than competing titles, enabling this no-subscription free model.

Over 3 million people have purchased the previous three Guild Wars products (Guild Wars, Guild Wars: Factions and Guild Wars: Nightfall) with those numbers set to surge again with the release of Guild Wars: Eye of the North on August 31, 2007.

8. Event or Tournament Fees
Netamin's free to play, ad-supported Ulimate Baseball Online uses event fees as an additional revenue stream. UBO's Pay to Play tournaments cost $5 per player to enter and offer cash prizes up to $4,500.

Third parties such as Valve's Tournament.com and Groove Game's Skillground.com are getting into the pay to play tournament scene as well. These sites charge charging entry fees for game tournaments for games such as Half-Life 2 and Counter-Strike.

What this means is that when you go to pay for a casual game or purchase virtual currency, you can instead select from a demographically targeted list of special offers. Trying or buying one of these offers - from merchants such as Avis, Geico, Vonage, etc - allows you to get your game purchase for free, as the offer merchant has paid the game provider for acquiring a new customer on their behalf.

TrialPay claims that this allows game developers to earn more per user, as some offers pay game developers upwards of $50 per user (as opposed to the $20 a casual game might normally charge).

Someone from TrialPay can jump in and give me a more relevant example of their system's use in the game space, but all I could find was a casual games company called Dreamquest Games.

10. Donations
Clocking in at last on the list is of alternate revenue streams is player donations. Raph Koster recently blogged about meeting up with the Kingdom of Loathing guys at ComicCon in San Diego. Raph reported that while KoL's revenue is "definitely indie," their primary revenue stream of player donations is a sustainable one.

According to Wired, the donation revenue has allowed creator Zack Johnson to quit his day job and hire six employees to help improve and maintain the product.

That's what Maid Marian founder Gene Endrody would call a "lifestyle business," but I suspect most of us wouldn't scoff at it or any of the above revenue models.

File this one under "Nexon Taking Over the World". Great partnership and it sounds like MapleStory's CCG>Online integration is well thought out. So everyone who buys a pack of cards gets a virtual item or experience of some sort.